Cattle Feeding Is Changing; The Quick Will Survive

Cattle feeding is a business in the midst of change, says Bill Mies, industry consultant and Texas A&M University professor emeritus. And it isn’t over yet.

Among the changes and adaptations Mies sees coming down the road for cattle feeders:

Ribeye area will have upper and lower limits on future grids. That’s because, as the industry chased muscling, it let ribeye size get out of control. With fewer consumers demanding a 16-in. ribeye cut that’s 1-in. thick, retailers will force packers to make a change. “You need a minimum 10-in. ribeye on Holsteins or you’re going to suffer discounts. But you’re also going to see, built into some grids, some discounts as well if you come in with 17- to 18-in. ribeyes.”

Tenderness standards will be built into some future grids. Some packers already are sorting carcasses for tenderness, and Mies says to expect more in the future.

“Red meat yield will become the grail,” Mies says. There’s a $50/head difference between YG 2.1 and YG 2.95. “We can make them Choice all day long and we’re not going to drive profit,” he says. “When we look at profit coming through a packing house door, it’s red meat yield that’s going to drive the engine.”

The cowherd will continue to shrink marginally. “We’re going to continue to siphon off cow numbers every year. It’s not going to be huge, but they’re going to continue to disappear,” he predicts, based on environmental concerns and a rapidly aging population of ranchers.

The cash market will continue to decline for fed cattle. “We’re down somewhere south of 50% in the cash market on any given week and some weeks, even lower than that.” Mies doesn’t think the cash market will go away, or even that it will decline to levels seen in pork and poultry. “I don’t know exactly what the number will be, but from where we are now, it’s going to continue to go lower.”

Risk management will be the central issue in obtaining financing. “Bankers will insist their money be protected when it’s loaned out for any kind of cattle-feeding operation,” he says.

“We’ll continue to have overcapacity,” especially in bunk space. “That means when we can flip a $10 bill, or $15, do it. We’ll have to learn to deal with narrow margins and be disciplined enough to accept them.”

Who will be the survivors? “You’ve heard of the quick and the dead?” he asks. “The quick will survive, and quick means the ability to change – people who are able to recognize trends and be able to change quickly with them in order to deal with the new realities of the marketplace.”